This story doesn’t do much to bolster Gov. Daniels claims that he balanced the state budget and that we’re on an economic hot streak. The state’s unemployment fund is running a deficit. To be clear, this is a problem that started before Gov. Daniels took office, but if he had truly balanced the state budget and Indiana’s economy was truly doing well under his stewardship, this wouldn’t be an issue.
The core of the problem is that more money is going out in unemployment benefits than is coming in from business taxes. And it has been occurring since 2000, when the year-end balance was $1.6 billion.
Now that balance is down to $318 million, but it had dipped to as low as $80 million in late April until second-quarter payments pushed it back up.
The solution is to cut benefits or to raise taxes. The Indiana Manufacturer’s Association seems to prefer the former.
Right now the maximum weekly benefit is $390, and 37 percent of those who receive unemployment are at that level.
Borror said the dollar level isnâ€™t out of place compared with the rest of the country, but the stateâ€™s replacement rate is high. This is the proportion of oneâ€™s wages replaced by unemployment insurance dollars. Indiana is seventh-highest in the nation at 52.1 percent, according to a DWD spreadsheet.
Now there are surely many who are fans of the “sink or swim” approach. Take the hard line and let these unemployed workers fend for themselves. After all, nobody owes them anything. But, even leaving compassion aside — which I’m willing to do — but that’s short sighted from a self-interested economic perspective. These guys go under and they start defaulting on rents, mortgages and the rest. Then, rather than simply needing a bridge to get them between jobs, they’re looking at more hardcore poverty with all of the negative societal consequences that entails.
There are limits, of course. But we’re just haggling over the price. Begrudging benefit payments generally is penny-wise and pound-foolish.